July 23, 2026
RCLCO’s 2026 Mid-Year Sentiment Survey finds an economy and real estate market pulling decisively away from its lows, even as present-day conditions remain short of what would be considered a strong or favorable market. Uncertainty has not disappeared, but RCLCO’s analysis of the results points to a market gathering real momentum toward greater stability and expansion in the months ahead.
Key Takeaways
- The RCLCO Real Estate Market Index (RMI)[1] climbed to 52.13 by Mid-Year 2026, a marked improvement for the index that struggled to reach 40 in 2025 – this moves the index back into the range typically associated with market expansion.
- Optimism about the year ahead has grown further, with nearly 60% of respondents now anticipating moderately or significantly improved conditions over the next 12 months — this is now more than 3x the number of respondents expecting conditions to worsen.
- Despite this, the fears of the market slipping into a recession remains elevated with approximately a quarter (25%) of respondents expecting a downturn sometime over the 12 months.
- Interest rates (73%) and inflation (63%) top this year’s list of biggest risks followed by geopolitical instability (43%) and capital availability (35%) for real estate.
- Like everyone else on the planet, real estate market participants are incorporating AI into their operations, and while adoption remains early-stage, most respondents (44%) report they are experimenting with AI individually; another 30% are making department level investments in AI, approximately 17% report making enterprise-level investments, and a full 7% report integrating AI in to core company workflow and systems – only a small fraction (3%) report they are making no meaningful investment of time or treasure in AI.
- The vast majority of respondents making investments in AI are relying heavily on off-the-shelf tools such as ChatGPT and Claude (79%) to boost productivity (85%), primarily in research and market analysis.
- Looking ahead, most respondents expect AI to help scale output rather than displace staff, with only 15% anticipating headcount reductions in specific functions over the next three years – and we are pretty sure Skynet did not take the survey…(that’s a Terminator reference for anyone under the age of 30).
Turning the Corner: Signals of Renewed Momentum in 2026
By Mid-Year 2026, the RMI shows a market that has emerged from the depths of stress. After hovering in the high 30’s to low 40’s throughout 2025, sentiment rose to 52.13, a meaningful gain that signals real estate market sentiment is improving, though the move remains a step toward stabilization rather than a dramatic turnaround. Having moved out of the range historically linked to economic and real estate market stress, the index still trails the long-term average since 2011 (59.3) and remains short of levels historically associated with a strong or favorable market. Overall, the responses reflect a real estate market that is steadily regaining confidence but has yet to reach levels seen in stronger periods. The Future RMI has risen to 70.5 from 63.4 at Year-End 2025, a signal that industry participants expect the recovery to gain further traction over the next 12 months, moving into favorable market conditions.
RCLCO National Real Estate Market Index
Source: RCLCO
Detailed Results:
Current National Sentiment Over Time
Source: RCLCO
Current sentiment has moved a long way from the depths of pessimism recorded in 2022 and 2023, when significantly worse readings were commonplace. That improvement gathered pace through 2024 and into 2025, and by Mid-Year 2026, positive views have overtaken negative ones for the first time since 2022: 39% of respondents now describe conditions as moderately or significantly better, versus 35% who still see them as moderately or significantly worse, while just over a quarter (27%) report no change. This shift tracks with the RMI itself, reinforcing that the market has turned a corner without yet reaching levels associated with a strong or favorable environment.
Browse Past Sentiment Surveys
12-Month U.S. Real Estate Market Predictions over Time
Source: RCLCO
Expectations for the coming year are markedly more positive than current sentiment. Notably, more than three times as many respondents anticipate moderate to significant improvement (59%) as those expecting conditions to worsen (18%), underscoring a continued shift toward optimism.
Recession Risk: A Modest Easing
When Will the Next U.S. Recession Occur?
Source: RCLCO
Expectations around recession timing have eased only slightly. At Mid-Year 2026, about a quarter (25%) of respondents see a recession within the next 12 months, down modestly from 29% at Year-End 2025, while those who view it as unlikely within 24 months ticked up to 35% from 30%. The shift signals a modest, incremental easing of recession concern rather than a sharp turnaround.
Top Risks Facing the Industry Today
When asked to name the three biggest risks facing their organization today, respondents pointed overwhelmingly to a small set of macro-driven concerns, with the remaining risks trailing behind. Interest rates and cost inflation rank highest and are closely related, both reflecting the elevated cost pressures shaping the current cycle, and together form the top tier of concerns. Geopolitical instability and capital availability follow as a second tier, cited by a smaller but still meaningful share of respondents. The remaining risks—regulatory shifts, labor availability, tenant demand, and insurance—round out the list further down.
What are the Three Biggest Risks Impacting your Organization Today?
Source: RCLCO
- Interest rates are the dominant concern, cited by nearly three-quarters of respondents (73%), as elevated and unpredictable rates continue to drive financing costs, compress cap rates, and complicate deal underwriting across the industry.
- Cost inflation ranks second at 63%, keeping the two leading concerns meaningfully ahead of the rest of the list, as rising construction, insurance, and operating costs continue to squeeze development feasibility and erode property-level margins.
- Geopolitical instability follows at 43%, a step down from the top two, reflecting concern that trade policy, tariffs, and global uncertainty could disrupt capital flows, materials pricing, and investor confidence.
- Capital availability (35%) trails geopolitical instability by a narrower margin, suggesting lending conditions have eased somewhat even as access to capital remains a live concern for some.
- Regulatory shifts (22%), human capital and labor availability (17%), tenant demand shifts (13%), and insurance costs (13%) round out the list — real factors to keep in mind, but ones that are top of mind to fewer respondents.
- Climate risk (1%) registers as the least pressing near-term concern in this year’s survey, though it remains a longer-term consideration for asset positioning and underwriting
AI Adoption in Real Estate Today
AI adoption across the real estate industry is accelerating, though most organizations remain in the early stages. Nearly 44% of respondents describe their firm’s use as individual experimentation rather than a coordinated effort, and just under a quarter have progressed to department-level or firmwide deployment — a reminder that, even as AI’s potential to reshape core real estate functions becomes clearer, most firms are still learning how to operationalize it at scale.
Which Best Describes Your Firm’s Current AI Implementation?
Source: RCLCO
Where firms are experimenting, they are overwhelmingly reaching for off-the-shelf tools. Public large language models such as ChatGPT and Claude are in use at nearly 80% of respondent organizations, far outpacing adoption of industry-specific real estate AI solutions (36%) or proprietary, in-house systems (24%). That gap suggests real estate-specific AI tooling still has room to mature before it displaces general-purpose platforms as the default choice.
What New Technologies are Your Company Actively Integrating?
Source: RCLCO
The rationale for adopting these tools is centered squarely on efficiency. More than 85% of respondents cite increasing employee productivity as a primary goal of their AI initiatives, with improving work quality close behind (71%); cost reduction, competitive positioning, and revenue growth all trail well behind. For an industry built on labor-intensive research, underwriting, and reporting, that points to AI being adopted first as a way to do more with existing teams — a theme that echoes the labor availability and cost inflation concerns flagged elsewhere in this survey.
What Are the Primary Goals of Your Company’s AI Initiatives Today?
Source: RCLCO
This productivity focus is concentrated in a handful of functions. Research is the activity most affected by AI, cited by more than two-thirds of respondents, with marketing, underwriting, and accounting/finance also seeing meaningful impact. These are exactly the data-heavy, time-intensive functions where AI’s ability to quickly process data, synthesize ideas, and produce clear writing helps real estate firms move faster — accelerating the legwork behind market analysis, underwriting, and marketing output, rather than replacing the skilled oversight and professional judgment those tasks ultimately require.
Which Business Functions are Experiencing the Greatest Impact?
Source: RCLCO
Looking three years out, respondents largely see AI as a scaling tool rather than a staff replacement: 39% expect it to let their organization grow revenue without proportional headcount growth, and another 37% anticipate no material staffing impact at all, while only 15% foresee reducing staff in specific functions. Taken together, the survey suggests the real estate industry views AI less as a threat to jobs and more as a lever to stretch existing teams further — a useful counterpoint to the labor and cost pressures raised elsewhere in this report. As adoption moves beyond individual experimentation, organizations that pair these tools with clear governance and deliberate workflow redesign are likely to capture the largest and most durable productivity gains.
Over the Next Three Years, How Do You Expect AI to Affect Your Company’s Staffing Needs?
Source: RCLCO
If you want to learn more about RCLCO’s AI Strategy & Governance Advisory work, click here to learn more:
RCLCO POV
Q2 2026 – Geopolitical uncertainty adds to investor caution; recovery still expected to strengthen in H2 2026 and beyond
Ongoing geopolitical dynamics continue to temper the stabilization trend that began to emerge in late 2025, contributing to inflationary pressures and clouding the Fed’s path forward. RCLCO will continue to monitor conditions and provide updates as the situation evolves.
Geopolitical-driven energy volatility has pushed inflation modestly higher and introduced headwinds for consumer and labor conditions, sustaining uncertainty across real estate markets. The Fed has held rates at elevated levels, GDP growth is expected to continue at a moderate pace through 2028, and consumer sentiment has softened. Real estate fundamentals have continued to adjust as apartment and industrial pipelines deliver, though select sectors show signs of stabilization.
Geopolitical dynamics suggest continued caution in underwriting, with financing costs remaining elevated and real estate fundamentals still working through a period of supply-demand rebalancing. That said, RCLCO’s base case is that the market recovery—and demand for new, high-quality real estate—will continue to strengthen in the second half of 2026 and beyond. Key risks include a prolonged conflict, sustained energy price volatility, and further labor market softening; upside scenarios include geopolitical resolution, resilient consumer spending, and continued AI-driven investment. Against this backdrop, national performance across property types remains uneven, shaped as much by sector-specific supply dynamics as by the macro environment:
- Multifamily: Nationally, strong absorption was outpaced by completions; fundamentals should improve as supply moderates, with markets and submarkets that avoided recent inventory growth likely to outperform.
- For-Sale Housing: Near-term softness as elevated mortgage rates, affordability constraints, and cautious consumer sentiment weigh on sales pace and margins; underlying fundamentals remain supported by household growth, limited distress risk, and structural undersupply.
- Senior Housing / BTR / Self-Storage: Structural demographic tailwinds and shifting homeownership trends likely to drive above-inflation rent growth.
- Neighborhood Retail: Vacancies have risen but remain below historical averages; healthy rent growth and limited new supply should support stability.
- Industrial: Absorption has cooled following an increase in development, pushing vacancies above long-term averages; while rent growth has been resilient, fundamentals could soften before rebounding in the mid-term.
- Data Centers: Strong fundamentals in the near term, but risk of overbuilding in the mid-term.
- Hospitality: Recovery led by leisure and gateway markets, though there could be sensitivity to consumer spending and rising air travel costs.
- Office: Net absorption turned positive but remained modest, suggesting vacancy has likely peaked, while overall rent growth remains subdued; however, performance varies significantly across markets, with premium office product in leading submarkets expected to outperform.
The current environment calls for disciplined, selective investment grounded in conservative underwriting, accounting for elevated financing costs, measured rent growth assumptions, and appropriate exit cap rates. Capital structures should favor lower leverage and refinancing flexibility. At the same time, RCLCO’s base case points to strengthening recovery in H2 2026 and beyond, creating opportunity for well-positioned investors to acquire institutional-quality assets with structural demand tailwinds ahead of broader market re-pricing. Portfolio strategy should emphasize sectors where supply headwinds are resolving and long-term demand is durable, while remaining attentive to energy prices, Fed policy, and labor market conditions in timing new commitments.
Who Took the Survey?
RCLCO’s Real Estate Market Sentiment Survey tracks the sentiments of a highly experienced pool of real estate professionals from across the country and industry. A majority (81%) of respondents have worked in the real estate industry for 20 years or more, with an average respondent tenure of approximately 29 years. Moreover, 92% of respondents are C-suite or senior executives in their organizations
Years of Experience in Real Estate
Source: RCLCO
Position in Organization
Source: RCLCO
Type of Organization
Source: RCLCO
Developers and builders represent the largest share of respondents at 48% of the sample. Another 23% are investors or capital allocators, followed by 3% in design or architecture firms. The remaining 25% of respondents come from a variety of other types of organizations within the real estate industry and public sector.
RCLCO conducts this sentiment survey twice a year to track the trends shaping real estate markets nationally. Beyond this survey, RCLCO’s management consulting group works alongside real estate organizations on the strategic questions that matter at every point in the cycle — from portfolio, investment, and organizational strategy to how firms approach emerging tools such as AI, an area RCLCO now supports through its newly formed AI Advisory practice. Click here to learn more about RCLCO’s management consulting services.
Sentiment Survey article and research prepared by Charlie Hewlett, Managing Director; and Kelly Mangold, Principal.
References
[1] The Real Estate Market Index (RMI) is based on a semiannual survey of real estate market participants and is designed to take the pulse of real estate market conditions from the perspective of real estate industry participants. The survey asks respondents to rate real estate market conditions at the present time compared with one year earlier (Current RMI), and expectations over the next 12 months (Future RMI). The RMI is a diffusion index calculated for each series by applying the formula “(Improving – Declining + 100)/2.” The indices are not seasonally adjusted. Based on this calculation, the RMI can range between 0 and 100. RMI values in the 60 to 70+ range are indicative of very good market conditions. Values below 30 are typically coincident with periods of economic and real estate market stress/recession.
Disclaimer: Reasonable efforts have been made to ensure that the data contained in this Advisory reflect accurate and timely information, and the data is believed to be reliable and comprehensive. The Advisory is based on estimates, assumptions, and other information developed by RCLCO from its independent research effort and general knowledge of the industry. This Advisory contains opinions that represent our view of reasonable expectations at this particular time, but our opinions are not offered as predictions or assurances that particular events will occur.
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